U.S. Refiners Reportedly Buying Most of Iraq's Oil

July 20
— Even as Saddam Hussein vows to use his country's oil as a weapon in the Middle East conflict, American companies are buying most of Iraq's U.N.-approved oil exports, oil industry sources tell ABCNEWS.com

An authoritative Iraqi source says that as much as 90 percent of the actual amount of Iraq's estimated 1.8 million barrels per day (bpd) are going to U.S. Gulf coast refineries.
"Most of Iraq's oil exports in July are destined to the U.S., with a few going to Europe," reported the authoritative oil journal Middle East Economic Survey.

There's such demand for Iraqi crude in the United States, the report says, that Saddam is banking on it to mitigate the Bush administration's enmity toward his dictatorship in Iraq, and therefore, any attempts to oust him.

Works Great, Less Taxing

Sources say American refiners prefer the Iraqi Kirkuk and Basrah oil varieties, because of their low sulfur content. When they can remove the sulfur more easily, refiners can make higher profits.

Many refiners have been investing heavily in special equipment to remove sulfur from crude oil, after the Environmental Protection Agency and the Justice Department reached agreements with nine refineries last March to reduce air pollution.

As part of the deal, they also agreed to collectively pay a $9.5 million civil penalty under the Clean Air Act and spend $5.5 million on environmental projects in communities affected by the refineries' pollution, the newsletter Alexander's Gas and Oil Connections reported.

The companies are required to spend an estimated $400 million for installing pollution controls.

American refiners' thirst for Iraqi oil has been ongoing. Reuters reported on May 12, 2000, that since 1998, U.S. imports of Iraqi crude oil have doubled to 750,000 bpd, 9 percent of total U.S. oil imports.

Oil industry sources tell ABCNEWS that the U.S. companies most heavily involved at present are Chevron, Exxon-Mobil, Bayoil and Koch Petroleum, which use it in their refineries in Louisiana and Texas.

Getting it to Market

The U.S. refiners largely obtain their crude oil from Russian firms, or middlemen working through Russian firms.

"Everyone makes a commission or gets a rakeoff at every step between the Iraqi oil fields and the U.S. refineries, mostly in [the] southern U.S. states," said a knowledgeable oil industry source.

Most of the U.N.-authorized oil sales have gone to Russian private trading firms as a reward for Moscow's pro-Iraqi positions in the U.N. Security Council, MEES editors said.

"Large volumes of crude are being taken away from previous customers and assigned to new [Russian] ones," MEES reported July 16.

This month, Russia stymied a U.S. attempt to revise U.N. sanctions against Iraq to focus on blocking military imports by vetoing it in the Security Council.

Of the two main ports used by Iraq to exports its "legal" oil, the one used by Russian traders has been seeing much more use.

America's refiners are getting most of their Iraqi oil from Ceyhan, Turkey, the terminus of a pipeline between Kirkuk and Ceyhan, because loading Iraqi crude oil there cuts out the need for supertankers to steam all the way around the Arabian Peninsula.

The other port, Mina-al-Bakr, a big offshore loading platform in the Arabian Gulf off the Iraqi port of Basrah, has seen use decline sharply in recent months.

That port is mainly used by supertankers bound for Asia. Iraq's main customers using this port include India, China, Japan and Malaysia, oil industry sources say.